Blockchain Developer Certification Practice

What is a key characteristic of non-fungible tokens (NFTs)?

1. They can be exchanged on a one-for-one basis.

2. They are uniform and divide well into parts.

3. They are unique and non-interchangeable with other tokens.

4. They are typically used for currency transactions.

The correct answer is: They are unique and non-interchangeable with other tokens.

Non-fungible tokens (NFTs) are characterized by their uniqueness and non-interchangeability with other tokens. This distinct characteristic is what differentiates NFTs from fungible tokens, such as cryptocurrencies like Bitcoin or Ethereum, where each unit is identical to another and can be exchanged on a one-for-one basis. NFTs are often used to represent ownership of unique digital assets, such as art, music, videos, and even virtual real estate, where each token holds a specific value defined by its unique attributes and the context of its ownership. As a result, each NFT can provide provenance and authentication, which are essential aspects for collectors and artists in the digital space. The other characteristics described in the other options do not apply to NFTs. For instance, NFTs cannot be divided into smaller parts in the same way fungible tokens can, nor are they used primarily for currency transactions. This unique feature of being one-of-a-kind is at the core of what makes NFTs a fascinating subject in the blockchain landscape.